Qualcomm (NASDAQ:QCOM) reported booming revenue and profit in its fiscal first quarter as sales of smartphones around the globe continued to drive growth. However, the shining results were colored by the company's acknowledgement that the Department of Justice and U.S. Attorney's office have started an investigation into Qualcomm's compliance with a financial transparency and corruption law.
The chipset maker reported net income of $1.4 billion in the quarter ended Dec. 25, up 20 percent from the year-ago period and up 33 percent sequentially. Qualcomm's revenue clocked in at $4.68 billion, up 40 percent year-over-year and up 14 percent sequentially. The company shipped 156 million MSM chipset units in the quarter, up 32 percent year-over-year and 23 percent sequentially. Qualcomm also raised its fiscal 2012 guidance, banking on licensing revenue as well as its Snapdragon chipset portfolio.
Despite the rosy results, Qualcomm disclosed that it is under investigation for compliance with the Foreign Corrupt Practices Act. According to Qualcomm CEO Paul Jacobs and the company's 10-Q filing with the Securities and Exchange Commission, on Jan. 27 the company learned that the Department of Justice, SEC and U.S. Attorney's Office for the Southern District of California started a preliminary investigation. The FCPA has two main provisions, one relating to accounting transparency and another that prohibits the bribing of foreign officials to gain commercial advantage.
The new investigation is related to a prior investigation that began in 2010. According to the filing, on Sept. 8, 2010, Qualcomm was notified by the SEC's Los Angeles Regional office of a formal order of private investigation. Qualcomm said the investigation arose from a "whistleblower's" allegations made in December 2009 to the audit committee of Qualcomm's board and to the SEC.
Qualcomm said the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. The company said the review into the whistleblower's allegations and related accounting practices "did not identify any errors" in the company's financial statements. Qualcomm said it "believes that it is in compliance with the requirements of the FCPA and will continue to cooperate with both agencies."
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